Schwarzenegger and Legislators Reach Budget Agreement

Gov. Arnold Schwarzenegger (R) and legislative leaders on Monday reached an agreement on an estimated $103 billion 2004-05 budget that relies on "billions of dollars in borrowing and one-time savings" and contains "little of the cuts" that the governor proposed in January, the AP/Contra Costa Times reports (Chorneau, AP/Contra Costa Times, 7/27). To win Democrats' support, Schwarzenegger agreed to reverse many proposed cuts to health and human services, including a measure to reduce the salaries of in-home assistants who work with the elderly and disabled (Marimow/Folmar, San Jose Mercury News, 7/27). Republicans were "claimed victory" because the budget does not include any new taxes and eliminates some proposed fees, the Sacramento Bee reports (Bluth, Sacramento Bee, 7/27). Schwarzenegger said Monday, "I am a very happy governor because we just agreed on a budget," adding, "We are happy we don't have to raise taxes. We are a month late, but it is much better than doing a budget that we rush." The proposed budget still leaves an estimated $10 billion budget shortfall for the next fiscal year, the Orange County Register reports (Quach, Orange County Register, 7/27). According to the Los Angeles Times, "[t]he deal was reached as the human cost of the political dispute [over the budget] was starting to take shape." On Monday, Controller Steve Westly (D) warned that state programs' payments to hospitals could end in a few weeks if the budget was not passed.

According to the Times, one of the final issues holding up the budget was the governor's plan to borrow $2.6 billion from city and county budgets over the next two years in exchange for a constitutional amendment prohibiting the state from doing so again. Democrats had opposed the proposal because they said that the "unprecedented [municipal budget] protection" would leave state social service programs vulnerable in the event of a fiscal emergency, the Times reports. Under Monday's compromise, the state will be able to borrow from cities and counties with a two-thirds vote of the Legislature, but such borrowing is limited to twice every 10 years (Halper, Los Angeles Times, 7/27). In addition, any loans must be repaid before the Legislature can borrow more municipal funds (Orange County Register, 7/27).

Assembly Speaker Fabian Nunez (D-Los Angeles) on Monday called on Democrats in the Legislature, some of whom had traveled to the Democratic National Convention in Boston, to return to Sacramento for a meeting on Tuesday and a possible floor vote on the budget by Wednesday or Thursday (Sacramento Bee, 7/27). According to the Los Angeles Times, the "tough sell" for passing the budget will be Republican lawmakers, some of whom have "expressed doubts about the amount of borrowing in the plan" (Los Angeles Times, 7/27). However, the AP/Times reports that the budget is expected to garner the two-thirds majority of the Legislature necessary to pass (AP/Contra Costa Times, 7/27).

Nunez said Monday that the proposed spending plan is "a budget we can be proud of" (Sacramento Bee, 7/27). Senate President Pro Tempore John Burton (D-San Francisco) said that he is "pleased with the budget," adding, "In the budget there are more things that we may not like, but on the whole we think it's a very fair budget for the people of California" (Los Angeles Times, 7/27). Sen. Sheila Kuehl (D-Los Angeles) said, "There have been a number of changes that I do like in higher education (and) that I do like in health and human services" (Drucker, Los Angeles Daily News, 7/27).